Rockwell Automation Earnings Call Insights: Process in China and Share Repurchases
Process in China
Stephen Tusa – JPMorgan: Can you just maybe provide some color on process in China?
Keith Nosbusch – Chairman and CEO: Well, specifically process in China I think was the impact there was mainly in project delays and really in the backlog where there was a delay in customers because of liquidity in some cases, delay in shipments, but probably the bigger impact of it was simply the large backlog depletion that we had in the fourth quarter left us with less to be able to ship in the first quarter. So, I think that was probably the bigger portion. We saw some additional delays throughout the quarter I would say the encouraging thing about process in China was the orders that we had during the quarter where we have rebuilt some of that backlog. So, I think it was a quarter – at this point we believe it was a quarter phenomenon.
Stephen Tusa – JPMorgan: Just a follow-up to that on the backlog build. The CPS solutions business seems like it had instantaneously here with your backlog, that 1.23 book-to-bill I guess you’re saying through the balance of the year, how much of this comes through in the second quarter, because that would imply quite a nice just like you had a pretty significant downdraft in the first quarter here would suggest CP&S bounces back pretty strongly in the second quarter, Yet you’re kind of guiding to moderate year-over-year growth which looks like it doesn’t account for that kind of bounce back in the second quarter on revenues?
Keith Nosbusch – Chairman and CEO: Well, Steve, I’d say what we believe is that, that build up in the first quarter doesn’t come out immediately the quarter after. So, that build up is why we have confidence in the growth rate in the second half of our year, and it’s why we believe the second quarter will be similar to the first quarter and the buildup while we are positive about the buildup, it does take a while to work its way through the organization and through the engineering and design process for those projects and it’s a second half phenomenon.
Stephen Tusa – JPMorgan: Were these orders late in the quarter, that’s my last question. So, were they late in the quarter, did they come kind of throughout the quarter?
Theodore D. Crandall – SVP and CFO: They weren’t disproportionately waited till December but our orders did ramp from October through December in the quarter. Steve, that was pretty much across the board not unique to solutions. And just one more comment on solutions, I think we do expect better solution sales in Q2 than Q1, but we think we will see more of the impact of that backlog build beyond Q2.
Scott Davis – Barclays Capital: Few questions but I think one thing that is pretty notable is kind of lack of commitment to share buyback here and I think – the question is kind of maybe it just shows a lack of confidence in the macro-environment. But if you look back at kind of the history of your share repurchases, you bought back a lot of stock in 2006 and 2007 and then a bit in 2008 and it’s been a little bit of a trickle since then. What’s really the cause of that? Is it that you just – lack of kind of macro confidence to put a lot of money to work here or do you at least have some substantial deal out there that’s kind of keeping you wanting to be more liquid? Help us kind of understand that, it looks pretty stark.
Theodore D. Crandall – SVP and CFO: First thing I would say is even excluding 2007, over the last three fiscal years, we have returned $1.3 billion in cash to shareowners, either through dividends or share repurchase. Basically our plan this year is to exhaust our free cash flow, at least that’s what we’re expecting at the moment to be free cash flow over the course of this year and that is the expectation we talked about of spending $400 million this year after acquisition spending and after dividends. We spent almost a quarter of that in the first quarter. So we believe we’re on pace for what we were expecting to do in terms of repurchases this year.
Scott Davis – Barclays Capital: Well I get it except just to play devil’s advocate, I mean, you’re holding almost no net debt and you’ve got almost $1 billion of cash in the balance sheet. That’s a pretty big number if you go back in history and look, that’s a much larger kind of number than the history. Again if there’s some macro uncertainty, I completely understand it, but otherwise – I guess I’ll move on. We can take this afterwards. I want to go back to Steve’s question in China and talk us through what kind of projects and volatility there I mean my understanding just in talking to your competitors is that China was more flattish for them in the quarter. You’re down 13 is probably – we are going to be an outlier for your broader comp group. I mean what specifically happened to Rockwell that cause that growth rate to modulate down so fast in the quarter?
Keith Nosbusch – Chairman and CEO: Let me first about the flat comment. Our orders were flat. So, we don’t see it as disconnect from what we had expected in that regard with orders continuing to perform. What happened is its pretty simple. It’s the aspect of a solutions business where it’s very lumpy and we have orders and sales that that certainly are more volatile than our product businesses and the timing and in this case, the timing drove a significant shipment in our fourth quarter. That created the hole in our backlog. We had weak second half orders. Rate in fiscal ’12 and that in in combination – a weaker I should say. A weaker order rate in the second half and that plus the shipments in the fourth quarter created the gap in shippable product and then during the quarter, we had some project delays and those are typical in a solutions business and I think it was just a combination of those multiples aspects that created a more severe outcome this quarter in China.
Rondi Rohr-Dralle – VP, IR and Corporate Development: Scott this is Rondi, and I just want to mention that back in the 2006/2007 timeframe we sold the power systems business and that generated net cash of over $1 billion. So, when you look at share repurchase from that period of time, that’s really an aberration I think what you’re seeing now is very consistent with our cash deployment philosophy that we’ve been talking about now for years.
Scott Davis – Barclays Capital: Just one quick comment I’ve just looked at if you’re holding $1 billion of cash and you got $1 billion in receivables, I mean you essentially have $2 billion of cash to the entity if you will. I mean that’s just a big number, so I’ll pass it on, but that’s just my observation.
Keith Nosbusch – Chairman and CEO: Yeah, Scott, that’s a fair observation. I think one of the things we’ve talked about on previous calls is, we’ve got over $1 billion of cash, but 90% of that sits outside the U.S. and we can’t easily access that without absorbing a significant tax penalty which we’ve been reluctant to do.
Scott Davis – Barclays Capital: I totally get it.
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